Thursday, December 23, 2010

India and China Agree to $100 Billion Trade Target


India and China have two of the world's fastest growing economies, and have agreed to more than double the trading between the two nations by 2015. Last week, Chinese Premier Wen Jiabao and Indian Prime Minister Manmohan Singh met to discuss the future of trade between India and China and agreed to set a bilateral trade target of $100 billion by 2015. The joint communique aims to expand co-operation in infrastructure, environment, information technology, telecommunications, and investment and finance. The two nations also agreed to organize an India-China Chief Executive Officers Forum that will settle business issues and make recommendations for the trade expansion, and to increase cooperation between the Reserve Bank of India and the China Banking Regulatory Commission to allow each nation to open bank branches in the other country.

During the last fiscal year trade between India and China reached $51 billion. This year that number is expected to reach $60 billion. That is an impressive increase, given that in 2005 trade stood at $15 billion. However, China's economy has been more prosperous over this period than India's, which is currently facing a $19 billion trade deficit. One of the primary goals of this trade agreement is to reduce that deficit and provide India with better market access for its exports to China.

Trade relations between India and China have been rocky over the years as India has imposed strict antidumping duties on Chinese imports. "Dumping" occurs when a country exports a product at a lower price than it would charge in its home market. India's antidumping duties were the highest of any country in the World Trade Organization last year to protect itself from China’s alleged artificially low prices. China has reciprocated by objecting to India's regulation of sourcing power and telecommunications equipment, alleging that they discriminate against Chinese producers.

In spite of an increasingly strong economic relationship, other contentious issues still exist between India and China. Included among these issues are a long-standing border dispute, China's military build-up along the border, and India's support for the Dalai Lama. Prime Minister Singh seems hopeful that this trade partnership may help them resolve some of these issues, stating that the agreement "will contribute to long term peace, stability, prosperity and development in Asia and the world."

Discussion Question: Do you think that a stronger economic partnership between India and China will help the two countries resolve long-standing political issues?


Allen Sawyer said...

It's gonna be a long process of reconciliation, though I'm positive thinking they've paved the way to progress.

Allen Sawyer
Dealer | Credit Card Machines

Arian said...

There's a better future for these two countries. However they pave their ways to success. Considering they have immediate resources (human & oil), they must continue with individual approaches, other than having to reconcile with the other party for better trade? this makes me think

Arian | make money online